Overview of FIDIC Short Form

The FIDIC Short Form of Contract – Green Book was drafted as a minor works contract to complement the other standard forms in the FIDIC suite of contracts. Initially the Contract was drafted for simple works with a value of less than USD 500,000.00 however it has evolved and now it is used for non-complex works regardless of value as it is clearly the complexity of the works which will determine if the short form is appropriate or not. Currently no financial limited is stated within the standard form or its accompanying notes.

The Green Book continues to reflect the principles and allocation of risk between the parties as the FIDIC Red and Yellow Books. It allows for either lump sum or other pricing and allows for design by either the Employer or the Contractor. There is no Engineer as with the Red and Yellow Books, but the Employer may nominate his Representative which may or may not be a professional engaged to manage the Contract Works. As the name suggests the Short Form is much briefer than the more detailed Red and Yellow Books with only fifteen clauses and four thousand five hundred words compared to the thirty thousand plus, word count for the Red Book.

This standard form includes a combined Offer and Acceptance form of Agreement. All variables such as values, dates time limits and similar items are dealt with and addressed in an Appendix. Definitions are consistent with the other FIDIC standard forms.

The events that are termed as the Employer’s risks are gathered into a single clause. Disputes are referred directly to a single adjudicator appointed jointly by the parties in the absence of an Engineer being available to provide a decision in the first instant.

Sub-Clause 3.1 of the Green Book provides for the nomination of an Authorised Person to have authority and act for the Employer in all matters under the Contract. The said person shall be nominated by the Employer and stated in the Appendix or may be notified to the Contractor by the Employer from time to time.

Sub-Clause 3.2 allows the Employer to additionally nominate another representative by stating:

“The Employer may also appoint a firm or individual to carry out certain duties. The appointee may be named in the Appendix, or notified by the Employer to the Contractor from time to time. The Employer shall notify the Contractor of the delegated duties and authority of this Employer’s representative.”

Unlike the Red Book it is important to note that the above clause does not allow the Contractor to assume that the Employer’s Representative has authority and so must check the notice of delegation to ensure that anything that the Employer’s Representative does is within his delegated authority.

The Green Book allows either traditional design provided by the Employer or it may be used in a design and build manner with design being provided by the Contractor.

Sub-Clause 5.1 States: “The Contractor shall carry out design to the extent specified, as referred to in the Appendix. The Contractor shall promptly submit to the Employer all designs prepared by him. Within 14 days of receipt the Employer shall note any comments or, if the design submitted is not in accordance with the Contract, shall reject it stating the reasons. The Contractor shall not construct any element of the permanent work designed by him within 14 days after the design has been submitted to the Employer or where the design for that element has been rejected. Design that has been rejected shall be promptly amended and resubmitted. The Contractor shall resubmit all designs commented on taking these comments into account as necessary.”

Sub-Clause 5.2 deals with the responsibility for design and states: “The Contractor shall remain responsible for his tendered design and the design under this Clause, both of which shall be fit for the intended purposes defined in the Contract and he shall also remain responsible for any infringement of any patent or copyright in respect of the same. The Employer shall be responsible for the Specification and Drawings.”

It attempts to provide a distinct limit of responsibility for the Specification which would be termed as the Employer’s Requirements under the Yellow or Silver Book. In effect the Short Form makes each party responsible for their own design as is required to be provided under the Contract. It has been said that this will lead to debate as to if any design flaws can be effectively tracked back to the design of the Contractor or Employer. The Short Form, however, does avoid the possibility of disputes stemming from shared ownership or responsibility for a document.

Sub-Clause 6.1 lists the Employer’s Liabilities which are events which can be found in nearly all standard forms as being valid reasons for considering and awarding of financial and time claims. Items (a) to (e) are the normal collection of risks such as wars, riots and nuclear contamination which one becomes accustomed to seeing in standard forms. Delays and costs caused by the Employer are covered by (f) early use, (g) Employer’s design, 6) suspension, (k) failure by the Employer and (m) variations. Force majeure and unforeseeable forces of nature are at items (h) and (i). Changes of law are at (n) and inevitable losses and damage which are the consequence of the works are covered by (o) and (p). The actual Extension of Time and Rights to Claim Additional Payment are dealt with in Sub-Clauses 7.3 and 10.4

Clause 6.1 lists 16 matters, all of which are familiar. Items (a) to (e) are the usual extreme risks such as wars, riots and nuclear contamination. Delays and costs caused by the Employer are covered by (f) early use, (g) Employer’s design, 6) suspension, (k) failure by the Employer and (m) variations. Force majeure and unforeseeable forces of nature are at items (h) and (i). Changes of law are at (n) and inevitable losses and damage which are the consequence of the works are covered by (o) and (p).

There is no express obligation on the Employer to provide soils data or indeed upon the Contractor to have examined the Site prior to tendering. Both of these factors will have to be taken into account when considering what is reasonably foreseeable by an experienced contractor. The more data that is given to the Contractor, the less he will be able to plead reasonable.

Sub-Clause 7.3 is short and simple:

“Subject to Sub-Clause 10.3, the Contractor shall be entitled to an extension to the Time for Completion if he is or will be delayed by any of the Employer’s Liabilities.

On receipt of an application from the Contractor, the Employer shall consider all supporting details provided by the Contractor and shall extend the Time for Completion as appropriate. “

Sub-Clause 7.4 deals with late completion where if the Contractor is late, then he pays a stated amount per day however there is no notice provision which may be viewed by some as an oversight, but in the context that the contract is for use in connection with minor works the omission may be justified and the inclusion of an early warning provision in sub-clause 10.3 does place obligations on the Contractor to minimise and notify the Employer as follows:

“A Party shall notify the other as soon as he is aware of any circumstance which may delay or disrupt the Works, or which may give rise to a claim for additional payment. The Contractor shall take all reasonable steps to minimise these effects.

The Contractor’s entitlement to extension to the Time for Completion or additional payment shall be limited to the time and payment which would have been due if he had given prompt notice and had taken all reasonable steps. “

Although this provision would not address to all possible circumstances it should limit the Contractors recovery of loss and expense in the event that the Contractors failure to notify of an event leading to time or cost implications where such notification would have allowed the Employer to take steps to minimise or mitigate such delays or additional costs.

Claims for additional payment are dealt with in Sub-Clause 10.4 which as with Sub-Clause 7.3 refers to the list of Employer’s Liabilities in Sub-Clause 6.1. The Contractor is paid “Cost” which has the same definition as the other FIDIC forms, being:

“All expenditure properly incurred (or to be incurred) by the Contractor, whether on or off the Site, including overheads and similar charges, but does not include profit”.

Variations are dealt with by Sub-Clause 10.1 which simply states:

“The Employer may instruct Variations.”

The terms “Variation” is defined as “a change to the Specification and/or Drawings (if any) which is instructed by the Employer under clause 10.1.”

The Procedure for Variations and Claims is detailed in Sub-Clause 10.5 which says:

“The Contractor shall submit to the Employer an itemised make-up of the value of Variations and claims within 28 days of the instruction or of the event giving rise to the claim. The Employer shall check and if possible agree the value. In the absence of agreement, the Employer shall determine the value.”

Variations are then valued in accordance with Sub-Clause 10.2 at an agreed lump sum, or at contract rates, or at new rates based on existing rates or new rates considered appropriate by the Employer or at Daywork rates.

Force Majeure is defined under Sub-Clause 1.1.14 in a similar manner to the major forms but without the list of examples that are traditionally found in force majeure clauses:

“Force Majeure” means an exceptional event or circumstance: which is beyond a Party’s control; which such Party could not reasonably have provided against before entering into the Contract; which, having arisen, such Party could not reasonably have avoided or overcome; and, which is not substantially attributable to the other Party.

Force majeure is one of the Employer’s Liabilities and also has its own Sub-Clause 13.2 which permits a party prevented from performing to suspend and, if the event prevents performance for 12 weeks or more, to terminate by giving 28 days’ notice.

Clause 12 deals with termination and provides that the Employer may give a 14-day notice to correct some default under the contract. If the Contractor has not “taken all practicable steps remedy the default” within the 14 days, then the Employer may terminate.

Similarly, the Contractor can give a 7-day notice of non-payment. If the money does not arrive within the 7 days, then the Contractor can suspend. Three weeks later (28 days from the first notice), if payment is still not forthcoming, the Contractor may terminate, again with immediate effect any time in the next 3 weeks.

Compensation recoverable due to termination is dealt with under Sub-Clause 12.4 which states:

“After termination, the Contractor shall be entitled to payment of the unpaid balance of the value of the Works executed and of the Materials and Plant reasonably delivered to the Site, adjusted by the following:

a) any sums to which the Contractor is entitled under Sub-Clause 10.4,

b) any sums to which the Employer is entitled,

c) if the Employer has terminated under Sub-Clause 12.1 or 12.3, the Employer shall be entitled to a sum equivalent to 20% of the value of those parts of the Works not executed at the date of the termination,

d) if the Contractor has terminated under Sub-Clause 12.2 or 12.3, the Contractor shall be entitled to the Cost of his suspension and demobilisation together with a sum equivalent to 10% of the value of those parts of the Works not executed at the date of termination.

The net balance due shall be paid or repaid within 28 days of the notice of termination.

The 20% stated Sub-Clause 12.4 (c) represents an estimate of the typical extra costs of engaging an alternative contractor to complete the Works where a Contractor has defaulted; and the 10% stated in Sub-Clause 12.4 (d) represents fair compensation for lost profit where the Employer has defaulted.

Clause 15 provides for disputes to be referred to adjudication by a single adjudicator to be agreed or appointed by the President of FIDIC unless another nominating body is named in the Appendix. The Rules are unique to the Green Book and give the adjudicator 8 weeks to make a decision.

The decision is final unless one party gives notice of dissatisfaction in accordance with Sub-Clause 15.2 within 4 weeks which states:

“If a Party is dissatisfied with the decision of the adjudicator or if no decision is given within the time set out in the Rules, the Party may give notice of dissatisfaction referring to this Sub-Clause within 28 days of receipt of the decision or the expiry of the time for the decision. If no notice of dissatisfaction is given within the specified time, the decision shall be final and binding on the Parties. If notice of dissatisfaction is given within the specified time, the decision shall be binding on the Parties who shall give effect to it without delay unless and until the decision of the adjudicator is revised by an arbitrator. “

There is no provision for amicable settlement, and at any time after the notice of dissatisfaction a party may commence arbitration. The UNCITRAL arbitration rules are suggested but alternative rules for arbitration may be substituted.